The Benefits of Giving with Qualified Charitable Distributions (QCDs)

We would like to let you know about a unique tax planning opportunity that can benefit both you and FONAM. If you already make charitable gifts and also are taking annual required minimum distributions from your pre-tax retirement accounts, please consider making a Qualified Charitable Distribution (QCD) to FONAM this year.

The tax code is complicated and constantly changing. You may not be aware of the rules around QCDs and we’d like to help.

Definition and Rules:

Withdrawals from your traditional IRA's (after age 59 1/2) are taxed as regular income. This can be a significant tax burden.
A QCD is a Qualified Charitable Distribution made directly from your IRA to an eligible charity (501c3), like FONAM. The advantage is - you (and the charity) avoid all taxation on the QCD distributed funds.
There is no limit to the number of different charities that can receive QCD's from you but you have an overall QCD total limit of $111,000 for 2026.
Anyone who is at least 70.5 years old can use it.
If you are 73 or older the QCD's will count as part or all of your annual Required Minimum Distribution (RMD) provided you make the QCD payments BEFORE withdrawing all of your required minimum distribution (“first dollar out” rule) during the tax year. Check with your financial advisor for details about this.
Example: Joseph’s RMD for 2026 is $36,000. He normally takes this in $3K monthly increments. If Joseph makes a QCD before receiving his total RMD, the tax normally assessed on the amount of the QCD is waived. Joseph can contact his IRA’s custodian and direct his next distribution to FONAM.

Why use QCD's:

If you have a traditional IRA and you're 70.5 or older and you give ANY money to charity, the QCD is for YOU! Here’s an example. Let’s say you currently give $25K per year to charities using your regular saved money and you’re in a 25% tax bracket. If you change to using QCD’s from your IRA to the charities - you’ve just given yourself a $6250 raise every year.
A big mistake would be to pull the money out of the IRA into your regular accounts and then give it to charity. That might vault you into a higher tax bracket.
Also, that extra income may also drive up your Medicare Part B premiums due to - Income Related Monthly Adjusted Amount (IRMAA). This is simply Medicare premium means testing. This could cost you several thousand MORE each year for Medicare coverage for you and your spouse. This is a fun little surprise nobody tells you about till after IRMAA bites you.

How to do it:

Contact your bank or brokerage company that holds your IRA. Tell them you want to make a QCD to your favorite charity – FONAM.
Designate the amount and frequency of the gift (annual is preferred).
Request that the check be made out to Friends of Naval Academy Music.
Direct them to mail the check to you (for your to forward on to FONAM), or they can send the directly to FONAM:

FRIENDS OF NAVAL ACADEMY MUSIC INC
1428 CROFTON PKWY
CROFTON, MD 21114

If you would like to read more about using qualified charitable deductions, visit: https://www.schwab.com/learn/story/reducing-rmds-with-qcds

For complete detailed information from the IRS, read Publication 590-B: Distributions from Individual Retirement Arrangements (IRAs). 2024 is the latest instructions the IRS had available at the time of writing this letter: https://www.irs.gov/pub/irs-pdf/p590b.pdf